Vegetable oil markets are being supported by geopolitical risks and higher crude oil prices, according to a report by Germany’s Union for the Promotion of Plants and Protein (UFOP).
Palm oil was also benefiting from biodiesel policy developments in Southeast Asia, the 30 April report said.
Vegetable oil prices edged up at the beginning of March but after the escalation of conflict in the Middle East, crude oil prices surged.
Higher crude oil prices improved the competitive advantage of biodiesel and, consequently, also the demand outlook for soyabean oil and rapeseed oil, the report said.
“The oil price shock has been affecting agricultural markets primarily via the energy and biofuel markets, providing particular support for vegetable oil prices.”
With the US biofuels policy providing additional support, soyabean oil prices were €1,155 (US$1,358)/tonne fob German mill at the end of March, up approximately 6% from the end of February.
However, this price level could not be maintained, with prices around the end of April falling to around €1,105 (US$1,299)/tonne, the report said.
On 21 April, rapeseed oil prices were around €1,165 (US$1,369)/tonne, an increase of almost 18% compared with the same period the previous year, although demand remained muted.
“Market participants acted with restraint, observing further developments. The increasingly tight supply of rapeseed oil raffinate has so far failed to stimulate further purchases,” the report said.
UFOP said it expected European Union (EU) rapeseed production to benefit from more ambitious quota requirements under Renewable Energy Directive (RED) III targets.
Since the beginning of March, palm oil prices had also increased and, at the time of the report, had climbed to the top of the vegetable oil price ranking, reaching the equivalent of €1,345 (US$1,581)/tonne.
Expectations of rising biodiesel demand in the two largest palm oil-producing countries, Indonesia and Malaysia, also supported palm oil prices, the report said.
“These expectations could limit the export potential of the leading palm oil suppliers and tighten global supply. On the other hand, prospects of record global palm oil production and a simultaneous slowdown in demand could counteract these price‑supportive factors.”
